Federal Offshore Wind Lease Auction An Important Step

The Department of Interior (DOI) announced recently the first-ever competitive offshore wind auction. Many policymakers and advocates are hailing it as a milestone moment: the auction offers leases for almost 165,000 acres of ocean off the coast of Rhode Island and Massachusetts, which if fully-developed, could power one million homes using clean wind power. While these short-term impacts are important, they’re still small compared to the overall clean energy needs of the United States (and the world). DOI’s auction is a much more important long-term step in support of offshore wind innovation.

Without a doubt, the opportunity is ripe for offshore wind technologies to generate low-carbon electricity. Seventy-eight percent of U.S. electricity demand comes from 28 coastal and Great Lake states, which geographically correspond well to high-speed offshore wind patterns. Many of these states pay higher average electricity costs than the rest of the country, providing an opening for low-cost, low-carbon energy alternatives (price data found here, page 7). But offshore wind has a big problem: it’s not cost-competitive with other sources of electricity.

The federal government, partnered with coastal states, recognizes this challenge and is implementing a multi-year innovation strategy to reduce the cost of offshore wind (Figure below), while improving performance.

The strategy addresses three critical challenges: high-costs of the offshore turbine technology itself; the lack of manufacturing, installation, maintenance, and interconnection systems for offshore wind; and the multi-jurisdictional permitting and siting process for development offshore. According to ITIF’s Energy Innovation Tracker, the DOE and the NSF invest in offshore wind science, research, development, early-stage deployment, and training to address these challenges, totaling nearly $100 million as of FY2012 (Figure below). These investments address a long-list of research challenges, including upgrading turbine technology for its operation at sea, developing and testing new turbine foundations that offer greater reliability and ease of installation, transmission issues, as well as technical shipping and maintenance challenges unique to offshore turbines.

In FY2012 the DOE invested $28 million in seven next-generation offshore wind demonstration projects. These projects are developing, testing, and permitting new turbine technologies, such as hurricane-resistant foundations, foundations that are environmentally friendly and easy to install, and floating turbine designs.

These potential advancements could greatly reduce the costs of offshore wind installation and maintenance. In FY2011, the DOE invested $6.7 million to develop modeling tools for designing higher performance turbine designs. And in the same year, the DOE invested $2.5 million to study how best offshore wind can be connected to the electric grid to enable transmission and commercial wind developers to plan accordingly for the next stage of technology integration.

While many next-generation offshore turbine designs – such as the floating turbine prototype demonstration off the coast of Maine – are still in the early stages of testing, additional demonstration and research on offshore wind requires building and testing more turbines connected to the grid, which is where the DOI auction comes in. Even though the lease area is small, it will allow more established renewable companies such as Wind Inc. and Mainstream Renewable Power to develop existing designs, and it will encourage start-up companies such as Neptune Wind to commercially build-out their designs. This will begin the process of identifying the infrastructure needs for building out commercial-scale sites, including the optimal shipping needs for installing turbines, efficient methods of maintenance, and developing turbine manufacturing facilities, all of which will require testing and potentially more research. Overtime, DOI’s leases will provide a commercially active platform for companies to test and install different offshore wind designs, especially as next-generation offshore wind technologies advance beyond the prototype and demonstration phase.

In other words, the significance of the DOI auction is really more about public sector support for offshore wind innovation rather than how many homes the leases will potentially power. It is the next logical step in a cohesive innovation strategy implemented by the federal government and supplemented with small but targeted public investments. Large-scale offshore deployment may still be years away, but the DOI auction will surely accelerate the development of cheap, reliable offshore wind technologies.